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Three dislocations stand out in this week’s MacroVantage, each a case of price and Qi’s macro models diverging as Europe’s sovereign stress radiates across markets.

Treasuries head the list......
with a warning about what their duration is really hedging.
Eurozone Sovereign Confidence is now the second-biggest driver of UST 10Y yields after inflation, and the sign is negative: peripheral stress means higher Treasury yields.
Model confidence sits at 84%, and as French stress spilled into BTPs, Qi fair value for US 10y jumped almost 40bp, leaving USTs rich in macro terms before an easing in EU spreads narrowed the Fair Value Gap from -1.6σ to -0.6σ.
The Sep/Oct 2022 global bond rout is the real analogue.
The takeaway: USTs still rally when equities wobble, but not when sovereigns do, so in a global bond bear market they offer no protection.

Eurozone banks are the second flag.......
The worst-performing sector as the OAT-Bund spread blew out, they now screen 0.7σ below Qi model fair value, towards the low end of their recent range. Model value has weakened, but spot has fallen materially further.
Backtesting the signal since 2009 produces 30 instances, 67% of which became profitable long opportunities, suggesting the sell-off may be running ahead of the macro deterioration.

Gold is the third......
Long gold versus short TLT is a popular debasement expression, but gold now sits 1.2σ (7.9%) rich to the 20y+ Treasury ETF.
EU Sovereign Confidence is a key driver, and the recent French and BTP spread blow-out pushed model value lower. Debasement may be the right long-haul trade, but these are not attractive levels to chase.

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